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Chapter 02 Asset Classes and Financial Instruments




Question;43.;In order for you to;be indifferent between the after-tax returns on a corporate bond paying 8.5%;and a tax-exempt municipal bond paying 6.12%, what would your tax bracket;need to be?;A.;33%;B.;72%;C.;15%;D.;28%;E.;Cannot tell;from the information given;44.;What does the term negotiable mean with regard to;negotiable certificates of deposit?;A.;The CD can be;sold to another investor if the owner needs to cash it in before its;maturity date.;B.;The rate of;interest on the CD is subject to negotiation.;C.;The CD is;automatically reinvested at its maturity date.;D.;The CD has;staggered maturity dates built in.;E.;The interest;rate paid on the CD will vary with a designated market rate.;45.;Freddie Mac and;Ginnie Mae were organized to provide;A.;a primary;market for mortgage transactions.;B.;liquidity for;the mortgage market.;C.;a primary;market for farm loan transactions.;D.;liquidity for;the farm loan market.;E.;a source of;funds for government agencies.;46.;The type of;municipal bond that is used to finance commercial enterprises such as the;construction of a new building for a corporation is called;A.;a corporate;courtesy bond.;B.;a revenue;bond.;C.;a general;obligation bond.;D.;a tax;anticipation note.;E.;an industrial;development bond.;47.;Suppose an investor;is considering a corporate bond with a 7.17% before-tax yield and a municipal;bond with a 5.93% before-tax yield. At what marginal tax rate would the;investor be indifferent between investing in the corporate and investing in;the muni?;A.;15.4%;B.;23.7%;C.;39.5%;D.;17.3%;E.;12.4%;48.;Which of the;following are characteristics of preferred stock?;I);It pays its holder a fixed amount of income each year at the discretion of its;managers.;II);It gives its holder voting power in the firm.;III);Its dividends are usually cumulative.;IV);Failure to pay dividends may result in bankruptcy proceedings.;A.;I, III, and;IV;B.;I, II, and;III;C.;I and III;D.;I, II, and IV;E.;I, II, III;and IV


Paper#55077 | Written in 18-Jul-2015

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